SEE FINAL NOTICE ISSUED ON 26 AUGUST 2016

DECISION NOTICE

ACTION

1.
For the reasons set out in this Notice, the FSA has decided to take the following
action:

(1)
impose on Mr Khan a financial penalty of £80,000;

(2)
withdraw the approval granted to Mr Khan, pursuant to section 63 of the Act,
to perform controlled functions; and

(3)
make an order, pursuant to section 56 of the Act, prohibiting Mr Khan from
performing any function in relation to any regulated activities carried on by
any authorised or exempt persons, or exempt professional firm.

SUMMARY OF REASONS

2.
Whilst an approved person at Sovereign, Mr Khan:

(1)
failed to act with honesty and integrity in carrying out his controlled functions,
in breach of Statement of Principle 1, by knowingly submitting a personal
mortgage application to a mortgage lender containing false and misleading
information about his income in the form of false payslips; and

(2)
failed to act with due skill, care and diligence in performing his significant
influence function, in breach of Statement of Principle 6, by failing to take
adequate steps to counter the risk that Sovereign might be used to further
financial crime, despite being aware of such a risk.

3.
The Statement of Principle 1 breach is aggravated by Mr Khan’s conduct during the
course of the investigation, namely his purported explanations for why he provided a
false income figure. When he was interviewed in September 2011, the FSA was aware
of only one of two personal mortgage applications, both of which contained the same
false income figure. In interview, Mr Khan repeatedly sought to divert responsibility
to his professional adviser for the misstatement of his income and claimed to be naïve
about the level of income he could declare to mortgage lenders.

4.
The subsequent discovery of the second application, submitted in 2007 and not made
in his capacity as an approved person, seriously undermined the plausibility of those
explanations. The FSA therefore considers that Mr Khan deliberately attempted to
give a false and misleading explanation to the FSA.

5.
The serious nature of these breaches, aggravated by his conduct in interview, leads the
FSA to conclude that Mr Khan is not a fit and proper person to perform functions in
relation to regulated activities carried on by an authorised person, exempt person or
exempt professional firm, and should be prohibited from doing so. Only a full
prohibition will prevent Mr Khan from undertaking mortgage activities.

6.
The financial penalty on Mr Khan would have been higher but for his personal
circumstances as explained later in this notice (see paragraph 99).

7.
This action supports the FSA’s regulatory objectives of:

(1)
reducing the extent to which it is possible for a regulated business to be used
for a purpose connected with financial crime; and

(2)
securing the appropriate degree of protection for consumers.

DEFINITIONS

8.
The definitions below are used in this Decision Notice.

(3)
“Act” means the Financial Services and Markets Act 2000;

(1)
“EG” means the FSA’s Enforcement Guide;

(2)
“FSA” means the Financial Services Authority;

(3)
“HMRC” means Her Majesty’s Revenue and Customs;

(4)
“Mr Khan” means Amir Khan;

(5)
“relevant period” means the period from 5 March 2007 to 10 May 2011;

(6)
“Sovereign” means Sovereign Worldwide Limited;

(7)
“Statements of Principle” means the FSA’s Statements of Principle and Code
of Practice for Approved Persons;

(8)
“SYSC” means the FSA’s Senior Management Arrangements, Systems and
Controls handbook; and

(9)
“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

FACTS AND MATTERS

9.
Sovereign was incorporated on 9 June 2000. It was authorised by the FSA to carry on
mortgage and general insurance activities.

10.
Mr Khan is the sole owner, director and employee of Sovereign. He is the only
person approved to perform a controlled function at Sovereign and has been solely
responsible for managing its business since it became authorised on 5 March 2007.

11.
On 5 March 2007, he was approved by the FSA to perform the controlled function of
director (CF1) and was approved to perform the controlled function of apportionment
and oversight (CF8) between 5 March 2007 and 31 March 2009.

12.
Mr Khan arranged regulated mortgage contracts for retail customers on a non-advised
basis through Sovereign. Between March 2007 and March 2011, Mr Khan arranged a
total of 16 regulated mortgage contracts.

Sovereign’s financial position

13.
Mr Khan confirmed that any income he earned via regulated business, unregulated
business and personal contract work was paid to Sovereign in the first instance.

14.
The following financial information was taken from Sovereign’s annual accounts:

Year ending 30

Turnover
Net

profit/(loss)

Cash at bank and in

hand

Director’s loan

owed to Mr Khan

2006
£8,913
£4,071
£9,862
£4,502

2007
£25,033
(£1,016)
£4,547
£884

2008
£18,716
£5,136
£18,649
£8,533

2009
£18,016
£2,506
£28,610
£15,643

15.
Mr Khan said that he did not tend to take any salary or dividends from Sovereign
because he lived from his rental income. The FSA has also obtained Mr Khan’s
HMRC records covering the period from 6 April 2007 to 5 April 2010. The records
show that Mr Khan took a minimal salary and no dividends from Sovereign in that
period.

Mr Khan’s personal mortgage application in December 2007

16.
On 9 December 2007, Mr Khan submitted a personal mortgage application through
Sovereign to a lender. The application was to port an existing mortgage on a
residential property to a new residential property. In this application, Mr Khan
declared a ‘present income’ from self-employment of £60,000 gross and an annual

rental income of £15,000. These amounts far exceeded those declared by Mr Khan to
HMRC in his tax return.

Mr Khan’s personal mortgage application in October 2009

17.
On 13 October 2009, Mr Khan submitted an online mortgage application through
Sovereign to a lender in his own name. The application was for a loan of £237,000 to
fund the purchase of a new residential property.

18.
In the application, Mr Khan stated that he was employed by WP Financial (a trading
name of Sovereign) and declared a total annual income of £74,500, comprising a
‘basic wage/salary before tax’ of £60,000 and ‘other secondary income’ of £14,500
relating to property rental.

19.
His declared income of £60,000 and his income from rent far exceeded the sums he
had declared to HMRC.

Income receivable from Sovereign

20.
Mr Khan claimed in interview that he could afford to pay himself a £60,000 income
annually, in part because of the money he had access to in Sovereign’s bank account.
The balance of Sovereign’s account on the day that Mr Khan submitted the mortgage
application was £27,196.

21.
In support of his mortgage application, Mr Khan submitted copies of three payslips to
the lender, dated July, August and September 2009, which appeared to show that he
had been paid a gross monthly income of £5,000 by Sovereign (i.e. the equivalent of
£60,000 per annum). The payslips included a ‘year to date - gross pay’ figure which
gave the impression that Mr Khan had been paid (and had incurred income tax on) a
total of £30,000 by Sovereign in the six months between 1 April 2009 and 30
September 2009.

22.
The information provided in these payslips was false. Mr Khan’s HMRC records
showed that he had not been paid £5,000 by Sovereign for any month in 2009. Mr
Khan confirmed this to be the case during an interview.

Potential income from contract work

23.
Mr Khan generated income by way of intermittent temporary contract work for
financial services institutions. He always arranged for the proceeds of the contracts to
be paid directly into Sovereign’s bank account.

24.
Mr Khan said that the £60,000 income figure he had declared to the lender took into
account the income he stood to earn from contract work.

25.
The FSA obtained records from Mr Khan and Mr Khan’s recruitment consultants in
relation to the contract work he had carried out in previous years. The approximate
income generated by Mr Khan through contract work totalled £7,000 in the year
ending 30 June 2007, £7,000 in the year ending 30 June 2008 and £2,000 in the year
ending 30 June 2009.

26.
On 9 October 2009, Mr Khan completed a six week contract for which he earned
approximately £5,000. By 13 October 2009, the day that Mr Khan submitted his
mortgage application, Mr Khan had been informed of a potential contract which he
had been deemed suitable to perform. The contract was not however formalised until
around five weeks after he submitted the application. If this contract had run its course
on the agreed terms, Mr Khan could have netted a maximum of £18,000, which would
have resulted in a maximum income from contract work in that tax year (April 2009-
March 2010) of only £26,850. As it was, Mr Khan earned only £4,200 for that
contract which was discontinued in January 2010.

Rental income

27.
Mr Khan owns an unencumbered property which he had let out to students each year
since 1993. In support of his mortgage application, Mr Khan submitted a rental
income form in which he stated that the maximum annual income he could receive
from the property’s rental was £14,500. He also provided copies of tenancy
agreements to the lender which showed that under the present rental agreement he
expected to receive £12,000.

28.
The FSA found that the rental income figures which Mr Khan declared to HMRC in
the tax years ending 5 April 2008, 2009 and 2010 were significantly lower than
£12,000, as he often did not receive the full amount of rental income in a year. When
asked why he had declared a rental income of £14,500 in his mortgage application, he
said “that’s probably just an oversight”.

Mr Khan’s substitute application

29.
Mr Khan did not take up the mortgage offered by the lender as a result of his
application of 13 October 2009 because he was not successful with the purchase of the
target property. However, on 6 May 2010, Mr Khan signed and submitted a
‘substitute property details application’ to the lender in which he applied for a loan of
£260,000 to fund the purchase of a different property.

30.
Mr Khan signed the substitute application, which included the following declaration:

“This form is supplemental to my previous mortgage application form dated
_______. I confirm that all the information given in both applications is
correct and where changes have occurred these have been advised and the
revisions inserted in (or attached to) the application form”.

31.
In the six months between submitting the original mortgage application and the
substitute application, Mr Khan had generated £4,200 in income from one temporary
contract which was paid into Sovereign’s account. Mr Khan had not paid himself
from Sovereign’s account during that period.

32.
In respect of the substitute application, Mr Khan did not take any steps to correct or
revise the income figures he had declared to the lender in the original mortgage
application. Mr Khan had no explanation for omitting to do so.

Mr Khan’s approach to countering financial crime risk

33.
SYSC 3.2.6R states that a firm must take reasonable care to establish and maintain
effective systems and controls in compliance with applicable requirements and
standards under the regulatory system and for countering the risk that the firm might
be used to further financial crime.

34.
As the only person approved to perform significant influence functions at Sovereign,
Mr Khan was solely responsible for ensuring that the business for which he was
responsible was managed with due care, skill and diligence, an aspect of which was to
ensure that Sovereign complied with SYSC 3.2.6R.

35.
In the context of a non-advised mortgage sales process, Mr Khan needed to exercise
due skill, care and diligence in countering the risks of financial crime by ensuring that
customers’ mortgage applications did not contain false information.

36.
Mr Khan dealt face to face with customers who were local to the Edinburgh area. He
also dealt with customers from the South of England over the telephone, who were
referred to him by a London-based introducer (“Introducer A”). Between 2009 and
2011, Introducer A referred around 20 customers to Mr Khan by emailing basic
details about the customers’ personal and financial circumstances to him. Mr Khan
then received original identification documents (such as the customers’ passports or
driving licences) in the post, certified a photocopy of the documents and forwarded
them to the relevant lender. This process of itself was not out of the ordinary.
However, sometimes Mr Khan would certify that the clients’ identification documents
were a true likeness of the clients themselves, without even meeting them face to face.

37.
Mr Khan was aware of the risk of submitting customer mortgage applications to
lenders containing false information since he knew that:

(1)
customers introduced to him by Introducer A or a second introducer had asked
him to create or submit false payslips on their behalf (or both); and

(2)
some customers had withheld information from him about mortgage arrears,
county court judgments or their employment status. Mr Khan found out about
this when lenders conducted their own checks and identified discrepancies in
the information provided.

38.
Despite being aware of these risks, Mr Khan failed to act with due skill care and
diligence for the following reasons.

(1)
Having been put on notice that customers introduced by Introducer A and a
second introducer presented an enhanced risk of financial crime, Mr Khan
continued to accept customers from those introducers and failed to change his
systems and controls to address that enhanced additional risk, for instance by:

(a)
adopting a greater level of scrutiny when verifying customers’ income,
instead of relying on the lender to conduct the relevant written checks
(i.e. employment referees, bank accounts and credit checks);

7


(b)
giving greater consideration to alternative ways in which he could
ensure that customers’ identification documents were genuine in
circumstances where he did not deal with them face to face;

(c)
exercising greater vigilance when submitting customer information
provided by Introducer A. For example, Introducer A introduced two
customers within a six week period who were both described as self-
employed construction workers trading as “[XX] Construction”, where
“[XX]” was the customer’s initials. Mr Khan submitted applications to
lenders containing this information and both applications were rejected
on the grounds of potentially false identity and employment
information.

(2)
In August and October 2010, Mr Khan supplied photocopies of two
customers’ passport photograph pages to lenders on which he had written “I
certify that this is a true copy of the original and a true likeness of the
applicant” when in fact he had never met or seen the customers. The
customers had been introduced to him by Introducer A. The lender rejected the
customers’ applications after discovering that the passport details provided
were false. Mr Khan told the FSA that he had improperly used a standard
wording when certifying the documents due to an oversight.

(3)
Introducer A referred another customer’s details to Mr Khan in November
2010, providing him with electronic copies of identification documents. Mr
Khan certified these documents and forwarded them to the lender during the
application process. There is no evidence that Mr Khan received hard copies
of the documents to allow him to certify them properly. The lender
subsequently reported to the FSA that it suspected the customer’s employment
and identity details to be false.

(4)
Introducer A referred two joint applicants to Mr Khan in March 2011. In
submitting an application on their behalf, Mr Khan provided the lender with
copies of their passports. In July 2011, the lender identified that the passport
information provided was false.

FAILINGS

39.
The regulatory provisions relevant to this Decision Notice are referred to in the
Annex.

Breach of Statement of Principle 1

40.
In his personal mortgage application submitted in 2009, Mr Khan declared income
figures significantly more than those declared to HMRC. Furthermore, those declared
income figures were significantly more than the annual income Sovereign had ever
generated and therefore significantly more than he could ever have earned personally.

41.
He therefore knowingly submitted a mortgage application to a lender which contained
false and misleading information about his income.

42.
Mr Khan’s explanations for the declared income figure in the 2009 mortgage
application were deliberately misleading.

False payslips

43.
When asked by the lender to provide evidence in relation to his income, Mr Khan
could have provided existing documents such as accounts, bank statements or HMRC
returns. Instead, Mr Khan arranged for three payslips to be created which gave the
impression that he had been paid a monthly salary of £5,000 by Sovereign between
April and September 2009.

44.
Mr Khan knew that the payslips were false and misleading given that:

(1)
most of the material information on the payslips was false, including that he
did not take a monthly salary at any point; and

(2)
he knew that he had not received a wage from Sovereign in the six months
preceding the first false payslip.

Rental income

45.
Mr Khan also declared an annual rental income of £14,500 when he knew that:

(1)
the maximum rental income he could earn in a year was £12,000; and

(2)
the actual rental income he had received in the previous three years was
substantially less than £12,000.

46.
Given that Mr Khan submitted a specific rental income form and tenancy agreements
to the lender in support of the mortgage application, Mr Khan’s explanation that the
£14,500 figure was an ‘oversight’ is not credible.

Substitute application form

47.
Six months after submitting the October 2009 application, Mr Khan signed a
substitute application form which included a declaration that the information he had
provided to the lender remained accurate. During that period, Mr Khan had not paid
himself any salary out of Sovereign’s reserves. Mr Khan’s suggestion that this was an
oversight is not credible.

48.
As the sole owner and controller of Sovereign, and as an individual who arranged
mortgages for customers, Mr Khan was aware of the need to submit accurate and
candid information to mortgage lenders when applying for a mortgage. He
acknowledged that lenders rely on the total income received, not a prediction about
what an applicant may be able to earn in the future.

49.
Mr Khan knowingly provided false information about his income in his 2009
mortgage application. In support of his application, he submitted payslips which he
knew to be false and misleading. Accordingly, Mr Khan breached Statement of
Principle 1.

50.
This breach is seriously aggravated by Mr Khan’s attempts to mislead the FSA about
his 2009 mortgage application through the explanations he advanced for his declared
income of £60,000. Those explanations, whilst already implausible, were shown to be
false on the discovery of the 2007 mortgage application in which he had declared an
identical income figure which bore no similarity to his financial position at that time.
The 2007 mortgage application demonstrates that he did not naively accept his
professional adviser’s advice because he had made the same false declaration two
years earlier.

Breach of Statement of Principle 6

51.
As an approved person performing a significant influence function at Sovereign, Mr
Khan was required to exercise due skill, care and diligence in managing Sovereign’s
business. Mr Khan was responsible for identifying and mitigating risks posed by
Sovereign’s non-advised mortgage business model, including its relationships with
introducers.

52.
Mr Khan did not act with due skill, care and diligence in managing Sovereign’s
business. He told the FSA that he was aware of the risk that Sovereign could be used
to facilitate fraud or dishonesty but failed to turn his mind to the steps he should have
taken to mitigate that risk. Mr Khan did not consider what controls he could have
applied to check the customer information provided to him by Introducer A, even
though he knew that customers had withheld information from him or asked him to
submit false information in their applications. He also relied on mortgage lenders to
identify discrepancies in customer information rather than taking steps to identify
them himself.

53.
As a result of this approach, Mr Khan exposed Sovereign to an increased risk of being
used for the purposes of mortgage fraud. This risk is known to have crystallised in
relation to four of the cases introduced by Introducer A, where lenders found that false
identification documents had been submitted. Mr Khan demonstrated a lack of due
skill, care and diligence.

Not a fit and proper person

54.
Mr Khan failed to act with honesty and integrity by knowingly submitting false and
misleading information to a mortgage lender in both 2007 and 2009. He also
demonstrated serious failings in competence and capability by exposing Sovereign to
the risk of being used for mortgage fraud. The seriousness of the facts and matters
described above demonstrates that Mr Khan fell short of the standards expected of a
person performing functions in relation to a regulated activity carried on by an
approved person.

REPRESENTATIONS

55.
Mr Khan made written representations on 27 November 2012, 13 December and 8
January 2013. He made oral representations on 10 January 2013 and further written
submissions on 16 January. This section contains a brief summary of the key
representations. In making the decision which gave rise to the obligation to give this
notice, the FSA has taken into account all of the representations, whether or not set
out below.

56.
Mr Khan said that the prohibition order was not in dispute. There was also no dispute
that the 2007 mortgage application had not been made in his capacity as an approved
person. He wished to make representations about the alleged breach of Statement of
Principle 1 in relation to the 2009 mortgage application and serious financial hardship.

57.
Mr Khan said that he did not act dishonestly and without integrity. The mortgage
application was incorrect but it was not unreasonable to assume that he would have
had an income of £60,000 although he did not have that income when the form went
in. He had substantial moneys in Sovereign and he had a number of contracts which
he hoped would come on line in the very near future.

58.
His income was inserted into the mortgage applications having been discussed with
his professional adviser. He had relied in good faith on the advice concerning his
present and prospective earnings and on the documentation, such as the pay slips,
which he had received from his adviser. It had been wrong for the adviser to state
‘earned income’ as opposed to ‘projected income’ but Mr Khan said that he should
not be responsible for that. At the very most, he had been a little reckless not to have
pointed it out at the time. The information on the payslips was correct. A drawdown
could have been made at any time to substantiate the information. Withdrawing funds
would have been futile and of no relevance.

59.
There was no intention to deceive any of the mortgage providers. No provider had
complained and no arrears had accrued. No-one had been disadvantaged. The test of
a successful mortgage application is the ability to meet payments.

60.
The FSA should be cautious in taking the view that his conduct was blatant dishonesty
as Mr Khan had not been subject to the rigours of the court process.

61.
There was no intention to deceive the FSA during the investigation. Mr Khan said that
he had co-operated throughout and had accepted voluntarily that Sovereign’s Part IV
permission should be cancelled. All statements and communications with the FSA
had been in good faith and with the intention of trying to assist and resolve matters
speedily. No previous disciplinary action had been taken against him by any relevant
body.

62.
If he was in breach of Statement of Principle 1, it was inadvertent.

63.
Mr Khan accepted that his KYC systems and controls were not up to standard.
However, he had no intention to mislead any of the mortgage providers about
information relating to third parties identification. He made no gain from his
inadequate processes.

64.
A prohibition order would be sufficient punishment.

Serious financial hardship

65.
Mr Khan said that he had no means of paying any financial penalty imposed. He had
been open and frank about his assets and liabilities and had had financial information

verified where possible. He also made other submissions relating to his personal
circumstances.

FINDINGS AND CONCLUSIONS

66.
The written representations were unequivocal: “I maintain the information in the
payslips which [my adviser] produced was correct”. To his credit, when questioned in
the course of making his oral representations about the information in some detail, Mr
Khan acknowledged that the information was not correct. He said that the payslips
were not true statements although he still believed they could be substantiated; that
they were correct based on a projection; that they were incorrect based on an actual
and that should have been made clear. Mr Khan admitted that it was not acceptable for
him to have relied on the payslips as evidence of actual payments in support of a
mortgage application.

67.
Although some credit is to be given to Mr Khan in finally acknowledging the false
nature of the payslips, it does not avoid the fact that:

(1) he knowingly used the false information in support of his mortgage application;

(2) he blamed his adviser for preparing payslips which he knew to be false without

acknowledging his responsibility for ensuring that they were accurate;

(3) he made the 2009 application in his capacity as an approved person and that, as

such, his clients would look to him to be a man of honesty and integrity; and

(4) he repeated in 2009 what he had done in 2007.

68.
It is self-evident, and a mortgage broker must have been aware, that a prospective
lender can only assess realistically whether to lend to someone when it is in
possession of the information it asks for. It is not fair to a prospective lender, apart
from being dishonest, knowingly to give a version of events, figures or information
based on anything else and pass them off as true.

69.
It is neither correct nor relevant to say that “The test of a successful mortgage
application is the ability to meet payments” as Mr Khan claimed (see paragraph 59).
The obligation of an applicant is to answer the questions fully and truthfully, putting
the lender into the position he expects to be. Referring, later, to matters such as
arrears, complaints and disadvantage, cannot help answer the question ‘Has the
application form been properly completed?’.

70.
The declaration to the mortgage lender that the information was correct (see paragraph
30) was not the case and Mr Khan knew that it was not the case.

71.
It should also be self-evident to anyone, and particularly to a mortgage broker acting
in the course of his business, that certifying a photograph as having a true likeness to a
person without having met the person is dishonest.

72.
The FSA has come to the clear conclusion that Mr Khan knew exactly what he was
doing when completing his mortgage applications and that his actions were dishonest
rather than reckless. It was not inadvertence on his part that led him to make two
applications in the manner that he did two years apart.

SANCTION

Financial penalty for breach of Statement of Principle 1

73.
The principal purpose of a financial penalty is to promote high standards of regulatory
conduct by deterring persons who have committed breaches from committing further
breaches, helping to deter other persons from committing similar breaches and
demonstrating generally the benefits of compliant behaviour.

74.
In determining whether a financial penalty is appropriate, the FSA is required to
consider all the relevant circumstances of a case. The FSA considers that a financial
penalty is an appropriate sanction in this case, given the serious nature of the breach
and the need to send out a strong message of deterrence to others. For the reasons
given below, the FSA believes that the appropriate penalty in this case for the
breaches of both Statement of Principle 1 and Statement of Principle 6 is £80,000.

75.
In relation to the breach of Statement of Principle 1, the FSA's policy on the
imposition of a financial penalty is set out in Chapter 6 of the version of DEPP in
force prior to 6 March 2010, which formed part of the FSA Handbook. The relevant
sections of DEPP are set out in more detail in the Annex to this Decision Notice.

76.
DEPP 6.5.2G sets out a non-exhaustive list of factors that may be of relevance in
determining the level of a financial penalty. The FSA considers that the following
factors are particularly relevant in this case.

Deterrence (DEPP 6.5.2G(1))

77.
The FSA consider that the imposition of the financial penalty is appropriate as it
supports the FSA’s stance on credible deterrence, both in terms of discouraging Mr
Khan and others from acting dishonestly and encouraging compliance with regulatory
standards and requirements.

The nature, seriousness and impact of the breach in question (DEPP 6.5.2G(2))

78.
In determining the appropriate sanction, the FSA has had regard to the seriousness of
the breach, including the facilitation of financial crime, and the extent to which the
breach demonstrated a lack of honesty and integrity on the part of Mr Khan.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2G(3))

79.
The FSA considers that Mr Khan acted in a deliberate manner.

Whether the person on whom the penalty is to be imposed is an individual (DEPP
6.5.2G(4))

80.
The FSA recognises that the financial penalty imposed on Mr Khan is likely to have a
significant impact on him as an individual but it is considered to be proportionate in
relation to the seriousness of the misconduct and to Mr Khan’s position as an
approved person performing a significant influence function at Sovereign.

The size, financial resources and other circumstances of the person on whom the
penalty is to be imposed (DEPP 6.5.2G(5))

81.
The FSA considers that a financial penalty of the level imposed is appropriate having
taken account of all relevant factors, including the impact such a penalty might have
on Mr Khan’s financial resources and the need for credible deterrence.

Conduct following the breach (DEPP 6.5.2G(8))

82.
Mr Khan actively sought in the FSA’s investigation to divert responsibility to his
professional adviser and claimed that he had naively adopted the £60,000 income
figure suggested to him. He did so despite knowing that his explanation was implicitly
contradicted by the fact that he had made the same false declaration to a lender in
December 2007.

Disciplinary record and compliance history (DEPP 6.5.2G(9))

83.
There has been no previous disciplinary action against Mr Khan.

Other action taken by the FSA (DEPP 6.5.2G(10))

84.
In determining the level of financial penalty, the FSA has taken into account penalties
imposed by the FSA on other approved persons for similar misconduct.

85.
Having considered all the circumstances set out above, the FSA has determined that
£80,000 is an appropriate financial penalty to impose on Mr Khan for the breach of
Statement of Principle 1 for deliberate involvement in mortgage fraud.

Financial penalty for breach of Statement of Principle 6

86.
In relation to the breach of Statement of Principle 6, which took place predominantly
after March 2010, the FSA’s policy for imposing a financial penalty is set out in
Chapter 6 of the current version of DEPP. Under the current version of DEPP, the
FSA applies a five-step framework to determine the appropriate level of financial
penalty. DEPP 6.5B sets out the details of the five-step framework that applies in
respect of financial penalties imposed on individuals in non-market abuse cases. The
five-step framework is described but for the reasons given in paragraphs 99 and 100
the resulting figure is reduced to £0.

Step 1 – disgorgement

87.
Pursuant to DEPP 6.5B.1G, at Step 1 the FSA seeks to deprive an individual of the
financial benefit derived directly from the breach where it is practicable to quantify
this.

88.
Since lenders identified and rejected the false customer information supplied by Mr
Khan, Mr Khan did not derive any financial benefit as a result of the breach.
Therefore the Step 1 figure is zero.

Step 2 – the seriousness of the breach

89.
Pursuant to DEPP 6.5B.2G, at Step 2 the FSA determines a figure that reflects the
seriousness of the breach.

90.
Mr Khan has not provided evidence to demonstrate his relevant income in the period
between March 2010 and March 2011. However, in the accounting period between 1
July 2010 and 31 June 2011 Mr Khan’s director’s loan account with Sovereign
increased by £11,132. In the absence of more recent information, the FSA had used
use £11,132 as relevant income figure.

91.
The FSA considers that the seriousness of Mr Khan’s misconduct should be
categorised under Level 4 (30%) since financial crime was occasioned as a result of
his misconduct.

92.
Therefore the step 2 figure is £3,300.

Step 3 – mitigating and aggravating factors

93.
Pursuant to DEPP 6.5B.3G, at Step 3 the FSA may increase or decrease the amount of
the financial penalty arrived at after Step 2, but not including any amount to be
disgorged as set out in Step 1, to take into account factors which aggravate or mitigate
the breach.

94.
Although, in response to the FSA’s invitation, Mr Khan has voluntarily varied
Sovereign’s Part IV permission so as to cease doing regulated business, he has since
alleged that he was forced into doing so. Moreover, Mr Khan has failed to reply to
information requirements in the set time limit. Therefore the FSA does not think that
his limited cooperation in agreeing to vary Sovereign’s Part IV permission should
have any material effect in reducing the penalty.

95.
On balance, the FSA does not consider it necessary to alter the penalty figure at Step
3. Therefore the Step 3 figure is £3,300.

Step 4 – deterrence

96.
When added to the penalty imposed for the breach of Statement of Principle 1, the
FSA considers that the total penalty of £83,300 would sufficiently deter the individual
who committed the breach. However, if the Statement of Principle 6 breach was being
considered in isolation the FSA would consider that the figure arrived at after Step 3
would need to be significantly increased to ensure credible deterrence.

Step 5 – settlement discount

97.
There is no settlement discount. The penalty figure after Step 5 is therefore £3,300.

Mr Khan’s personal circumstances and serious financial hardship

98.
Mr Khan made a number of submissions relating to his personal circumstances,
including his financial circumstances. In considering his personal circumstances, the
FSA has taken into account in particular that Mr Khan is living with his disabled
mother who has, or had, an interest in the property in which they are living. The

extent of that interest has never been made fully clear but for these purposes the FSA
is prepared to acknowledge that what happens to Mr Khan affects his mother.

99.
In some cases of mortgage fraud, the conduct of the applicant is such that no account
should be taken of serious financial hardship notwithstanding that it may lead to
insolvency. The FSA would have taken the view that this was such a case. However,
in view of the particular circumstances of Mr Khan, the FSA has decided to reduce the
penalty for breach of Statement of Principle 6 to £0.

100.
In doing so, the FSA recognises that any penalty it imposes must be appropriate which
requires it to consider all the circumstances of each case. In the case of Mr Khan, the
FSA has taken into account all the circumstances of which it is aware including in
particular that he shares his home with his mother, the financial penalty for breach of
Statement of Principle 1 and the full extent of the financial position of Mr Khan so far
as it can be assessed. The FSA does not accept that Mr Khan has “no means” of
paying any financial penalty.

Withdrawal of approval and prohibition

101.
Mr Khan has failed to act with honesty and integrity by knowingly submitting false
and misleading information to two mortgage lenders. He has also failed to act with
competence and capability as an approved person performing the director function
(CF1) by exposing Sovereign to the risk of being used to facilitate financial crime. As
such, Mr Khan is not fit and proper to perform any function in relation to any
regulated activity carried on by any authorised person, exempt person or exempt
professional firm.

102.
It is appropriate and proportionate in all the circumstances to withdraw the approval
given to Mr Khan to perform controlled functions at Sovereign and to make an order
prohibiting Mr Khan from performing any regulated activity carried on by any
authorised person, exempt person or exempt professional firm.

103.
The FSA has had regard to the guidance in Chapter 9 of EG in proposing that Mr
Khan’s approval be withdrawn and that he be prohibited from performing any
regulated activity. The relevant provisions of EG are set out in the Annex to this
Notice.

PROCEDURAL MATTERS

Decision maker

104.
The decision which gave rise to the obligation to give this Notice was made by
Regulatory Decisions Committee.

105.
This Decision Notice is given to Mr Khan under sections 57 and 67 and in accordance
with section 388 of the Act. It is given to Sovereign under section 63 of the Act and in
accordance with section 388 of the Act. The following statutory rights are important.

The Tribunal

106.
You have the right to refer the matter to which this Decision Notice relates to the
Upper Tribunal (the “Tribunal”). The Tax and Chancery Chamber is the part of the

Upper Tribunal, which, among other things, hears references arising from decisions of
the FSA. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, you have 28 days from the date on which this Decision Notice
is given to you to refer the matter to the Tribunal.

107.
A reference to the Tribunal is made by way of a reference notice (Form FTC3) signed
by you (or on your behalf) and filed with a copy of this Notice. The Tribunal’s
contact details are The Upper Tribunal, Tax and Chancery Chamber, 45 Bedford
Square, London WC1B 3DN (tel: 020 7612 9700; email:

financeandtaxappeals@tribunals.gsi.gov.uk).

108.
Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax
and Chancery Chamber)” which is available from the Upper Tribunal website:

109.
A copy of Form FTC3 must also be sent to Rachel West at the FSA, 25 The North
Colonnade, Canary Wharf, London E14 5HS at the same time as filing a reference
with the Tribunal.

Access to evidence

110.
Section 394 of the Act applies to this Decision Notice. The persons to whom this
Decision Notice is given have the right to access:

(1) the material upon which the FSA has relied on in deciding to give this Notice; and

(2) any secondary material which, in the opinion of the FSA, might undermine that

decision.

111.
There is no such secondary material.

Third party rights

112.
There are no third party rights.

Confidentiality and publicity

113.
You should note that this Decision Notice may contain confidential information and
should not be disclosed to a third party (except for the purpose of obtaining advice on
its contents). The effect of section 391 of the Act is that neither you nor a person to
whom this notice is copied may publish it or any details concerning it unless the FSA
has published the notice or those details. The FSA must publish such information
about the matter to which a Decision Notice or Final Notice relates as it considers
appropriate. You should be aware, therefore, that the facts and matters contained in
this notice may be made public.

FSA contacts

114.
For more information concerning this matter generally, contact Rachel West (direct
line: 020 7066 0142; fax: 020 7066 0143) of the Enforcement and Financial Crime
Division of the FSA.

Andrew Long
Acting Chairman, Regulatory Decisions Committee

ANNEX (paragraphs 39, 75 and 103)

STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

Statutory provisions

1.
The FSA’s regulatory objectives are set out in section 2(2) of the Act and include
maintaining confidence in the financial system and the protection of consumers.

2.
Section 56 of the Act provides that the FSA may make a prohibition order prohibiting
an individual from performing a specified function.

3.
Section 63 of the Act provides that the FSA may withdraw an individual’s approval to
carry out a controlled function if it considers that the person in respect of whom it was
given is not a fit and proper person to perform the function to which the approval
relates.

4.
Section 66 of the Act provides that the FSA may take action to impose a penalty on an
individual of such amount as it considers appropriate where it appears to the FSA that
the individual is guilty of misconduct and it is satisfied that it is appropriate in all the
circumstances to take action. Misconduct includes failure, while an approved person,
to comply with a statement of principle issued under section 64 of the Act or to have
been knowingly concerned in a contravention by the relevant authorised person of a
requirement imposed on that authorised person by or under the Act.


Handbook provisions

5.
In exercising its power to impose a financial penalty, the FSA must have regard to
relevant provisions in the FSA Handbook of rules and guidance (“the FSA
Handbook”). The main provisions relevant to the action specified above are set out
below.

Statements of Principle and the Code of Practice for Approved Persons

6.
The Statements of Principle and the Code of Practice for Approved Persons (“APER”)
sets out the Statements of Principle as they relate to approved persons and
descriptions of conduct which, in the opinion of the FSA, do not comply with a
Statement of Principle. APER further describes factors which, in the opinion of the
FSA, are to be taken into account in determining whether or not an approved person’s
conduct complies with a Statement of Principle.

7.
APER 3.1.3G states that when establishing compliance with or a breach of a
Statement of Principle, account will be taken of the context in which a course of
conduct was undertaken, including the precise circumstances of the individual case,
the characteristics of the particular controlled function and the behaviour to be
expected in that function.

8.
APER 3.1.4G provides that an approved person will only be in breach of a Statement
of Principle where he is personally culpable, that is in a situation where his conduct
was deliberate or where his standard of conduct was below that which would be
reasonable in all the circumstances.

9.
APER 3.1.6G provides that APER (and in particular the specific examples of
behaviour which may be in breach of a generic description of conduct in the code) is
not exhaustive of the kind of conduct that may contravene the Statements of Principle.

10.
The Statements of Principle relevant to this matter are:

(1)
Statement of Principle 1, which provides that an approved person must act
with integrity in carrying out his controlled function; and

(2)
Statement of Principle 6, which provides that an approved person performing a
significant influence function must exercise due skill, care and diligence in
managing the business of the firm for which he is responsible in his controlled
function.


11.
APER 3.1.8G provides, in relation to applying Statements of Principle 5 to 7, that the
nature, scale and complexity of the business under management and the role and
responsibility of the individual performing a significant influence function within the
firm will be relevant in assessing whether an approved person’s conduct was
reasonable.

12.
APER 3.3.1E states that in determining whether or not the conduct of an approved
person performing a significant influence function complies with Statements of
Principle 5 to 7, the following are factors which, in the opinion of the FSA, are to be
taken into account:

(1)
whether he exercised reasonable care when considering the information
available to him;

(2)
whether he reached a reasonable conclusion which he acted on;

(3)
the nature, scale and complexity of the firm’s business;

(4)
his role and responsibility as an approved person performing a significant
influence function; and

(5)
the knowledge he had, or should have had, of regulatory concerns, if any,
arising in the business under his control.

13.
APER 4.1.4E(3) states that deliberately misleading (or attempting to mislead) a client,
the firm or the FSA by act or omission is conduct that does not comply with Statement
of Principle 1. APER 4.1.4E (9) states that such conduct includes, but is not limited to,
providing false or inaccurate documentation or information.

14.
APER 4.6 lists types of conduct which, in the opinion of the FSA, do not comply with
Statement of Principle 6. These include:

(1)
failing to take reasonable steps to adequately inform himself about the affairs
of the business for which he is responsible; and

(2)
permitting transactions without a sufficient understanding of the risks
involved.

Senior Management Arrangements, Systems and Controls

15.
One of the purposes of SYSC is to encourage firms’ directors and senior managers to
take appropriate practical responsibility for their firms’ arrangements on matters likely
to be of interest to the FSA because they impinge on the FSA’s functions under the
Act.

16.
SYSC 3.2.6R states that a firm must take reasonable care to establish and maintain
effective systems and controls for compliance with applicable requirements and
standards under the regulatory system and for countering the risk that the firm might
be used to further financial crime.

DEPP guidance pre 6 March 2010

17.
The FSA has had regard to the guidance on the imposition and amount of penalties set
out in Chapter 6 of the version of DEPP in place between 28 August 2007 and 5
March 2010. All references to DEPP in this subsection of the Notice refer to the
DEPP guidance in place during that period.

18.
DEPP 6.1.2G provides that the principal purpose of imposing a financial penalty is to
promote high standards of regulatory and/or market conduct by deterring persons who
have committed breaches from committing further breaches, helping to deter other
persons from committing similar breaches, and demonstrating generally the benefits
of compliant behaviour.

19.
DEPP 6.5.1G(1) provides that the FSA will consider all the relevant circumstances of
a case when it determines the level of financial penalty (if any) that is appropriate and
in proportion to the breach concerned.

20.
DEPP 6.5.2G sets out a non-exhaustive list of factors that may be relevant to
determining the appropriate level of financial penalty to be imposed on a person under
the Act. The following factors are relevant to this case:

Deterrence: DEPP 6.5.2G(1)

21.
When determining the appropriate level of financial penalty, the FSA has regard to the
principal purpose for which it imposes sanctions, namely to promote high standards of
regulatory and/or market conduct by deterring persons who have committed breaches
from committing further breaches and helping to deter other persons from committing
similar breaches, as well as demonstrating generally the benefits of compliant
business.

The nature, seriousness and impact of the breach in question: DEPP 6.5.2G(2)

22.
The FSA will consider the seriousness of the breach in relation to the nature of the
rule, requirement or provision breached, which can include considerations such as the
duration and frequency of the breach, whether the breach revealed serious or systemic
weaknesses in the person’s procedures or of the management systems or internal
controls relating to all or part of a person’s business, the nature and extent of any
financial crime facilitated, occasioned or otherwise attributable to the breach and the
loss or risk of loss caused to consumers, investors or other market users.

The extent to which the breach was deliberate or reckless: DEPP 6.5.2G(3)

23.
The FSA will regard as more serious a breach which is deliberately or recklessly
committed, giving consideration to factors such as whether the person has given no
apparent consideration to the consequences of the behaviour that constitutes the
breach. If the FSA decides that the breach was deliberate or reckless, it is more likely
to impose a higher penalty on a person than would otherwise be the case.

Whether the person on whom the penalty is to be imposed is an individual: DEPP
6.5.2G(4)

24.
When determining the amount of penalty to be imposed on an individual, the FSA
will take into account that individuals will not always have the resources of a body
corporate, that enforcement action may have a greater impact on an individual, and
further, that it may be possible to achieve effective deterrence by imposing a smaller
penalty on an individual than on a body corporate. The FSA will also consider
whether the status, position and/or responsibilities of the individual are such as to
make a breach committed by the individual more serious and whether the penalty
should therefore be set at a higher level.

The size, financial resources and other circumstances of the person on whom the
penalty is to be imposed: DEPP 6.5.2G(5)

25.
The FSA may take into account whether there is verifiable evidence of serious
financial hardship or financial difficulties if the person were to pay the level of
penalty appropriate for the particular breach. The FSA regards these factors as matters
to be taken into account in determining the level of a penalty, but not to the extent that
there is a direct correlation between those factors and the level of penalty.

Conduct following the breach: DEPP 6.5.2G(8)

26.
The FSA may take into account the degree of co-operation the person showed during
the investigation of the breach by the FSA.

Other action taken by the FSA (or a previous regulator): DEPP 6.5.2G(10)

27.
The FSA seeks to apply a consistent approach to determining the appropriate level of
penalty. The FSA may take into account previous decisions made in relation to similar
misconduct.

DEPP guidance since 6 March 2010

28. The FSA has also had regard to the guidance on the imposition and amount of

penalties set out in Chapter 6 of the current version of DEPP. All references to DEPP
in this subsection of the Notice refer to the current DEPP guidance.

29. DEPP 6.4.1G provides that the FSA will consider all the relevant circumstances of the

case when deciding whether to impose a financial penalty.

30. The five steps referred to in DEPP 6.5B (The five steps for penalties imposed on

individuals in non-market abuse cases) are set out in more detail below.

Step 1 - disgorgement

31. The FSA will seek to deprive an individual of the financial benefit derived directly

from the breach (which may include the profit made or loss avoided) where it is
practicable to quantify this.

Step 2 – the seriousness of the breach

32. The FSA will determine a figure which will be based on a percentage of an

individual's "relevant income". "Relevant income" will be the gross amount of all
benefits received by the individual from the employment in connection with which the
breach occurred (the "relevant employment"), and for the period of the breach.

33. This approach reflects the FSA's view that an individual receives remuneration

commensurate with his responsibilities, and so it is reasonable to base the amount of
penalty for failure to discharge his duties properly on his remuneration. The FSA also
believes that the extent of the financial benefit earned by an individual is relevant in
terms of the size of the financial penalty necessary to act as a credible deterrent. The
FSA recognises that in some cases an individual may be approved for only a small
part of the work he carries out on a day-to-day basis. However, in these circumstances
the FSA still considers it appropriate to base the relevant income figure on all of the
benefit that an individual gains from the relevant employment, even if his
employment is not totally related to a controlled function.

34. Having determined the relevant income the FSA will then decide on the percentage of

that income which will form the basis of the penalty. In making this determination the
FSA will consider the seriousness of the breach and choose a percentage between 0%
and 40%.

35. In deciding which level is most appropriate to a case against an individual, the FSA

will take into account various factors which will usually fall into the following four
categories:

(1)
factors relating to the impact of the breach;

(2)
factors relating to the nature of the breach;

(3)
factors tending to show whether the breach was deliberate; and

(4)
factors tending to show whether the breach was reckless.

36. Factors relating to the impact of a breach committed by an individual include the level

of benefit gained or loss avoided, or intended to be gained or avoided, by the
individual from the breach, either directly or indirectly.

37. Factors relating to the nature of a breach by an individual include:

(1)
the nature of the rules, requirements or provisions breached;

(2)
the frequency of the breach;

(3)
the nature and extent of any financial crime facilitated, occasioned or
otherwise attributable to the breach;

(4)
the scope for any potential financial crime to be facilitated, occasioned or
otherwise occur as a result of the breach; and

(5)
whether the individual took any steps to comply with FSA rules, and the
adequacy of those steps.

38. Factors tending to show the breach was reckless include:

(1)
the individual appreciated there was a risk that his actions or inaction could
result in a breach and failed adequately to mitigate that risk; and

(2)
the individual was aware there was a risk that his actions or inaction could
result in a breach but failed to check if he was acting in accordance with
internal procedures.

39. In following this approach factors which are likely to be considered 'level 4 factors' or

'level 5 factors' include:

(1)
financial crime was facilitated, occasioned or otherwise attributable to the
breach;

(2)
the breach created a significant risk that financial crime would be facilitated,
occasioned or otherwise occur; and

(3)
the breach was committed deliberately or recklessly.

Step 3 – mitigating and aggravating factors

40. The FSA may increase or decrease the amount of the financial penalty arrived at after

Step 2, but not including any amount to be disgorged as set out in Step 1, to take into
account factors which aggravate or mitigate the breach. Any such adjustments will be
made by way of a percentage adjustment to the figure determined at Step 2.

41. The following factors may have the effect of aggravating or mitigating the breach:

(1)
the conduct of the individual in bringing (or failing to bring) quickly,
effectively and completely the breach to the FSA's attention (or the attention
of other regulatory authorities, where relevant);

(2)
the degree of cooperation the individual showed during the investigation of the
breach by the FSA, or any other regulatory authority allowed to share
information with the FSA;

(3)
whether the individual took any steps to stop the breach, and when these steps
were taken;

(4)
any remedial steps taken since the breach was identified, including whether
these were taken on the individual's own initiative or that of the FSA or
another regulatory authority;

(5)
the previous disciplinary record and general compliance history of the
individual;

(6)
whether FSA guidance or other published materials had already raised relevant
concerns, and the nature and accessibility of such materials; and

(7)
whether the FSA publicly called for an improvement in standards in relation to
the behaviour constituting the breach or similar behaviour before or during the
occurrence of the breach.

Step 4 – adjustment for deterrence

42. If the FSA considers the figure arrived at after Step 3 is insufficient to deter the

individual who committed the breach, or others, from committing further or similar
breaches then the FSA may increase the penalty. Circumstances where the FSA may
do this include:

(1)
where the FSA considers the absolute value of the penalty too small in relation
to the breach to meet its objective of credible deterrence;

(2)
where previous FSA action in respect of similar breaches has failed to improve
industry standards;

(3)
where the FSA considers it is likely that similar breaches will be committed by
the individual or by other individuals in the future; and

(4)
where a penalty based on an individual's income may not act as a deterrent, for
example, if an individual has a small or zero income but owns assets of high
value.

Step 5 – settlement discount

43. The FSA and the individual on whom a penalty is to be imposed may seek to agree

the amount of any financial penalty and other terms. In recognition of the benefits of
such agreements, DEPP 6.7 provides that the amount of the financial penalty which
might otherwise have been payable will be reduced to reflect the stage at which the
FSA and the individual concerned reached an agreement.

Enforcement Guide (“EG”)

44. The FSA’s policy on exercising its enforcement power is set out in EG, which came

into effect on 28 August 2007.

45. The FSA’s approach to exercising its powers to make prohibition orders and withdraw

approvals is set out at Chapter 9 of EG.

46. EG 9.1 states that the FSA’s power under section 56 of FSMA to prohibit individuals

who are not fit and proper from carrying out controlled functions in relation to
regulated activities helps the FSA to work towards achieving its regulatory objectives.
The FSA may exercise this power to make a prohibition order where it considers that,
to achieve any of those objectives, it is appropriate either to prevent an individual

from performing any functions in relation to regulated activities, or to restrict the
functions which he may perform.

47. EG 9.2 states that the FSA’s effective use of the power under section 63 of FSMA to

withdraw approval from an approved person will also help to ensure high standards of
regulatory conduct by preventing an approved person from continuing to perform the
controlled function to which the approval relates if he is not a fit and proper person to
perform that function. Where it considers this is appropriate, the FSA may prohibit an
approved person, in addition to withdrawing their approval.

48. EG 9.3 states that in deciding whether to make a prohibition order and/or, in the case

of an approved person, to withdraw its approval, the FSA will consider all the relevant
circumstances.

49. EG 9.4 sets out the general scope of the FSA’s power in this respect. The FSA has the

power to make a range of prohibition orders depending on the circumstances of each
case and the range of regulated activities to which the individual’s lack of fitness and
propriety is relevant.

50. EG 9.5 provides that the scope of the prohibition order will depend on the range of

functions which the individual concerned performs in relation to regulated activities,
the reasons why he is not fit and proper and the severity of risk which he poses to
consumers or the market generally.

51. EG 9.9 provides that when deciding whether to make a prohibition order against an

approved person, the FSA will consider all the relevant circumstances of the case.
These may include, but are not limited to, the following:

(1)
whether the individual is fit and proper to perform the functions in relation to
regulated activities. The criteria for assessing the fitness and propriety of
approved persons are set out in FIT 2.1 (honesty, integrity and reputation), FIT
2.2 (competence and capability) and FIT 2.3 (financial soundness) (EG
9.9(2));

(2)
whether, and to what extent, the approved person has:

(a)
failed to comply with the Statements of Principle issued by the FSA
with respect to the conduct of approved persons; or

(b)
been knowingly concerned in a contravention by the relevant firm of a
requirement imposed on the firm by or under the Act (including the
Principles and other rules) (EG 9.9(3));

(3)
the relevance and materiality of any matters indicating unfitness (EG 9.9(5));

(4)
the length of time since the occurrence of any matters indicating unfitness (EG
9.9(6));

(5)
the particular controlled function the approved person is (or was) performing,
the nature and activities of the firm concerned and the markets in which he
operates (EG 9.9(7)); and

(6)
the severity of the risk which the individual poses to consumers and to
confidence in the financial system (EG 9.9(8)).

52. EG 9.12 provides a number of examples of types of behaviour which have previously

resulted in the FSA deciding to issue a prohibition order. The examples include
severe acts of dishonesty, which may have resulted in financial crime and serious lack
of competence (EG 9.12(3)).

53. EG 9.14 states that where the FSA considers it is appropriate to withdraw an

individual’s approval to perform a controlled function within a particular firm, it will
also consider, at the very least, whether it should prohibit the individual from
performing that function more generally. Depending on the circumstances, it may
consider that the individual should also be prohibited from performing other
functions.

54. EG 9.23 provides that in appropriate cases the FSA may take other action against an

individual in addition to making a prohibition order and/or withdrawing its approval,
including the use of its power to impose a financial penalty.